9 December 2013

BioLineRx is a research client of Edison Investment Research Limited

BioLineRx is entering a catalyst-rich phase over the next 12 months, which will see early clinical data from studies of two internal R&D projects, BL-8040 (acute myeloid leukaemia) and BL-8020 (HCV). Pivotal data should also emerge in 2014 from BioLineRx’s lead partnered programme, BL-1040, for the prevention of cardiac remodelling following acute myocardial infarction and from BL-5010 for benign skin lesions. Ahead of these key catalysts, we value BioLineRx at $210m, equivalent to $8.9/ADR (basic) or $7.9/ADR (fully diluted).

Year end Revenue (NISm)

PBT* (NISm)

EP ADR* (NIS)

DP/ADR (NIS)

P/E (x)

Yield (%)

12/11 0.0 (46.1) (3.7) 0.0 N/A N/A 12/12 0.0 (77.1) (4.3) 0.0 N/A N/A 12/13e 0.0 (63.1) (2.7) 0.0 N/A N/A 12/14e 0.0 (41.5) (1.8) 0.0 N/A N/A

Note: *PBT and EPADR are normalised, excluding intangible amortisation, exceptional items and share-based payments.

Catalyst-rich period ahead for key trial results BioLineRx is entering a catalyst-rich phase over the next 12 months. It will see the data from the outcome of a pivotal study of BL-1040 (bioabsorbable cardiac matrix), for the prevention of cardiac remodelling after acute myocardial infarction and from a pivotal CE mark registration study for BL-5010 (benign skin lesions). Data from early studies of BL-8040 (acute myeloid leukaemia) and BL-8020 (hepatitis C virus infection) will also emerge in 2014.

BL-1040 data in 2014 is a key event The outcome, due in 2014, of the 306-patient PRESERVATION-1 study of BL-1040 is likely to be a major stock catalyst. The study has been conducted by BioLineRx’s partner Ikaria and is designed to support a CE Mark application. A separate US registration study is expected to get underway in the near future, BL-1040 addresses a large and currently un-served market opportunity, which could potentially be valued at ~$2bn/year.

Financials BioLineRx ended the third quarter with US$20m in cash, which should be sufficient to last to mid-2015, without the receipt of milestones. We presume milestones are payable on a successful result in the PRESERVATION-1 study, a CE mark filing and approval, which may be received during this period, as well as from other possible sources of funding, such as potential out-licensing deals.

Valuation: $210m or $8.9/ADR Considering only five key pipeline assets, we value BioLineRx at $210m, equivalent to $8.9/ADR (basic) or $7.9/ADR (fully diluted). This indicates over 200% upside to the current share price, an unusually high ratio. It should also be stressed that this is a current fair value and not a future-orientated price target.

BioLineRx Initiation of coverage

Exploiting IP from the land of milk and honey

Price US$2.59 Market cap US$61m

$0.27/NIS

Net cash ($m), 30 Sept 20

ADRs in issue 23.7m

Free float 75%

Code BLRX

US exchange NASDAQ

Local exchange TASE

Share price performance

% 1m 3m 12m

Abs (1.6) (1.4) (13.7)

Rel (local) (3.3) 13.6 (32.4)

52-week high/low US$4.75 US$1.60

Business description

BioLineRx is a dual US-Israel listed biopharmaceutical company focused on the development of biomedical IP principally derived from academic sources in Israel. It is advancing multiple in-licensed programmes simultaneously through early clinical development.

Next events

BL-8040 data Q413/H214

BL1040 pivotal data 2014

Analysts

Robin Davison +44 (0)20 3077 5737

Jason Zhang PhD +1 646 653 7027

healthcare@edisongroup.com

Edison profile page

Pharma & biotech

BioLineRx | 9 December 2013 2

Investment summary: Finding hidden value

Company description: IP search and development BioLineRx is a biopharmaceutical company focused on the development of biomedical IP principally derived from academic sources in Israel. It was founded in 2003 by a consortium consisting of Teva Pharmaceuticals and several Israeli VC funds in the life-sciences area. The company raised US$50m in its IPO on the Tel Aviv Stock Exchange (28.7m shares at US$1.74/share) in February 2007 and listed its shares on NASDAQ as ADRs (1 ADR=10 shares) in July 2011. It has raised a total of US$128m in six financings to date. Based in Jerusalem, it employs 43 staff. As of December 2012, BioLineRx had an accumulated deficit of US$124m.

Exhibit 1: BioLineRx key R&D programme summary (clinical only) Prod code Indication Mechanism Stage of development Originator/partner BL-1040 Cardiac remodelling Mechanical support CE mark registration BG Negev Tech/ Ramot, licensed to Ikaria. BL-5010 benign skin lesions Mummification/preservation Bridging study for CE mark Innovative Pharmaceutical Concepts BL-8040 AML/haem. cancers CXCR4 antagonist Phase II Biokine Therapeutics BL-7040 IBD TLR9 and acetylcholinestererase Phase II Yissum/Hebrew University BL-8020 HCV Inhibitor of autophagy Phase I/II Genoscience BL-7010 Coeliac disease Binding/sequestration of gliadins Entering Phase I/II Univalor Source: Edison Investment Research

Valuation: rNPV suggests fair value of $8.9/ADR Our valuation considers five key pipeline assets and suggests a value of $210m, equivalent to $8.9/ADR (basic) or $7.9/ADR (fully diluted). This suggests there is over 200% upside to the current share price ($2.5/ADR), an unusually high ratio, and it should be noted that this is a current fair value and not a price target. Our valuation is struck on the basis of a risk-adjusted NPV, based on our assumptions of the terms of potential and actual licensing agreements, and development of peak sales, using a standard 12.5% cost of capital and making assumptions about development costs up to the expected point of licensing. This is adjusted for BioLineRx’s proportional economic interest in each programme. The largest contributor is BL-1040, for which we calculate a value of $109m, 52% of the total.

Sensitivities: Development, partnering risks BioLineRx is subject to typical biotech company development risks, including the unpredictable outcome of trials, regulatory decisions, the success of competitors, financing and commercial risks. The investment case hinges on the success of its studies and ability to secure partnerships on attractive economic terms. BioLineRx is heavily reliant on its key commercial partner, Ikaria. Most of BioLineRx’s R&D projects are pre-proof of concept and can therefore be assumed to have a high (and difficult to assess) risk of failure. The ADR price may be sensitive to movements in the US$/NIS exchange rate. The company is based in Israel and thus, relative to Europe and North America, it is (or may be perceived to be) subject to a higher operational risks as a result of volatile politics in the Middle East. However, specific political risks are not considered in this report.

Financials: Financed into 2015 BioLineRx ended the third quarter (30 Sept), with cash reserves of NIS71.6m (c US$20.3m), which should be sufficient to fund operations into mid-2015 in the absence of milestone payments and assuming continuation of the current level of R&D spend. BioLineRx has 237m shares outstanding, equivalent to 23.7m ADRs (one ADR=10 shares).

BioLineRx | 9 December 2013 3

Outlook: Exploiting IP from the land of milk and honey

BioLineRx’s investment case effectively hinges on the successful development, partnering and commercialisation of the key programmes in its R&D portfolio. BioLineRx has a broad R&D portfolio with six active clinical-stage drug and medical device programmes, one of which is already out-licensed to a commercial partner. The company operates a business model under which it seeks to identify and in-license promising clinical and preclinical programmes from academic sources that can be advanced quickly and at low cost through to clinical proof-of-concept.

Founded as an incubator for Israeli biomedical science BioLineRx was founded as a technology transfer company in 2003 by a consortium consisting of Teva Pharmaceuticals, and several Israeli VC funds in the life-sciences area. BioLineRx has formal and informal arrangements that provide it with a legal or de facto right of first offer over bioscience technologies arising from most of Israel’s leading academic organisations. Israel has a number of world-class academic centres including the Hebrew University of Jerusalem (ranked top in Israel and 21st in the world), Bar-Ilan and Ben Gurion Universities, Technion (Israel Institute of Technology), the Weizmann Institute and the Hadassah Hospital. The company screens a large number of licensing opportunities (~200/year) and aims to identify and in-license a small number that it considers to be the most promising and capable of being advanced with the financial resources it has available. BioLineRx has also acquired IP from commercial sources, both in Israel and outside.

BioLineRx’s model is to acquire the IP covering these programmes in exchange for a share of future sub-licensing revenues, with little or no milestones payable. This approach has allowed it to assemble an impressive R&D pipeline over the past 10 years, but it does also mean that it holds only a proportional (typically ~75%) economic interest in each of its R&D programmes. As part of its in-licensing agreements, BioLineRx agrees to fund 100% of the cost of development before partnering. Nevertheless, the fact it does not have to pay a large upfront or development milestones on its projects means it can support a larger number of programmes, thus effectively mitigating development risk across a larger portfolio.

Its strategy is to advance these programmes through preclinical and early clinical development to proof-of-principle quickly and in a cost efficient manner. This requires a discipline to terminate unpromising or technically challenging programmes early. In the 10 years since its inception, BioLineRx has initiated 43 development programmes (of which 10 remain) and 38 feasibility projects (of which five are underway). If its initial development is successful, it seeks to out-license programmes to partners that can complete the development and commercialise the products, allowing it to earn an economic return. BioLineRx operated an incubator for development of preclinical candidates (BioLine Innovations Jerusalem) under a government-sponsored funding mechanism from Israel’s Office of the Chief Scientist (OCS), although this agreement is ending at the end of 2013.

Stock listed on NASDAQ and Tel Aviv BioLineRx’s stock is listed on the Tel Aviv and NASDAQ stock exchanges (the latter as ADRs, where one ADR =10 shares). Trading volume is split broadly equally and the pricing differences between the two exchanges are small (<5%). We assume non-Israeli investors would be more interested in the ADR listing and thus displays financial forecasts on a per ADR basis.

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Exhibit 2: BioLineRx R&D pipeline (clinical only) details Product code Description/mechanism Studies ongoing, planned, completed Licensor/partner IP BL-1040/ Bioabsorbable Cardiac Matrix (BCM)/IK-5001

An aqueous mixture of sodium alginate and calcium gluconate administered as a liquid via intra-coronary injection during PCI following STEMI. On contact with damaged cardiac tissue, it polymerises to a gel, which provides mechanical support, and allows healing with a more compact, less dilated and tighter scar. This reduced cardiac remodelling with consequent improvement in long-term cardiac function. See video.

306-pt pivotal CE mark registration trial administered through intracoronary injection after percutaneous coronary intervention (PCI) but within five days of onset of symptoms to subjects who have all had successful PCI with stent placement after STEMI. Agreement reached with FDA for one-year follow up on three endpoints: Anatomical, six-minute walk and QoL (Kansas City Cardiomyopathy Questionnaire).

Licensed to Ikaria for US$7m upfront, US$115m in development milestones ($10m received to date) and US$150m in commercial milestones plus 11-15% royalties sales. Licensed from BG Negev Technologies (Ben Gurion University), in exchange for 28% share of all receipts.

Patents granted or pending worldwide, 20-year expiration in 2024 (2029 in the US).

BL-5010P Pen-like applicator containing BL-5010, a novel aqueous formulation of two acids (both already approved for use in cosmetics) for non-surgical removal of benign skin lesions. Single application topically causes the lesion to dry out and shed within 1-3 weeks. Treatment is non-invasive, poses minimal infection risk and requires no anaesthesia or bandaging. Will be treated as a Class IIa medical device in Europe.

Up to 20 pt single-arm, open-label bridging study of a single application for removal of seborrheic keratosis (SK) lesions. A 60-pt Phase I/II trial of BL5010 in removal of SK lesions achieved 96.7% success in removal of the lesion at 30 days after a single application with good cosmetic results. Showed a good safety profile with no persistent irreversible AEs observed at the treated site.

Licensed from Innovative Pharmaceutical Concepts, a subsidiary of Pharmaceutical Enterprises.

Provisional patent on the BL-5010 applicator pending, 20-year expiration in 2033.

BL-8040/ (formerly BKT-140)

A short peptide antagonist for CXCR4, a chemokine receptor that is directly involved in tumour progression, angiogenesis, metastasis and cell survival. CXCR4 is over-expressed in more than 70% of human cancers and its expression often correlates with disease severity.

50-pt Phase II study of cytarabine ± BL-8040 in adults with relapsed/ refractory acute myeloid leukaemia. A prior 18-pt open-label Phase I/II trial in multiple myeloma showed good safety and tolerability (data are shown in Exhibit 6). Orphan Drug Designation for AML.

Licensed from Biokine Therapeutics, in exchange for 40-60% of sublicensing revenue (the proportion reducing in line with BioLineRx’s R&D spend).

Granted or pending worldwide, 20-year expiration in 2022 (2023 in the US).

BL-7040 Oral synthetic chemically modified synthetic oligodeoxynucleotide with dual activity on both the CNS (acetylcholinesterase) and immune systems (Toll-Like receptor 9 agonist). It is suitable for neurological diseases and immune system related conditions.

22-pt open-label Phase I/II in moderately active ulcerative colitis completed (see Exhibit 6). The compound was studied (as EN101) in a Phase IIa study in myasthenia gravis (by Ester Neuroscienes/Amarin) with high levels of efficacy. Evaluation in a validated murine model of IBD showed a therapeutic effect similar to dexamethasone.

Licensed from Yissum (Hebrew University of Jerusalem). Modest milestones ($600k) plus 28-29.5% of any consideration from sublicense.

Granted or pending worldwide, 20-year expiration in 2021.

BL-8020 Proprietary fixed-dose combination of ribavirin and hydroxychloroquine (HCQ) intended to replace use of ribavirin in potential all-oral (interferon-free) combination treatments for HCV. Its proposed mechanism (inhibition of HCV-induced autophagy) in the host cells suggests pan-genotypic activity.

32-patient open-label Phase I/II study over 16 weeks in chronic HCV of all genotypes who have previously failed or relapsed following standard-of-care treatment. The study is designed to allow intra-subject analysis, in order to determine the extent to which HCQ enhances ribavirin’s antiviral activity.

Licensed from Genoscience, a French biotech company.

International patent pending, 20-year expiration in 2031. US Notice of allowance.

BL-7010 Orally available, non-absorbable polymer (copolymer of sodium styrene sulfonate and 2-hydroxyethyl methacrylate) intended for the treatment of celiac disease and gluten sensitivity. The polymer has a high affinity for gliadins, the immunogenic peptides present in gluten, which are sequestered and excreted from the digestive tract.

A 32-pt Phase I/II study will shortly commence. The study is a two-part (single and repeated), double-blind, placebo-controlled, dose escalation study. Safety and efficacy has been demonstrated in preclinical studies without any interaction with non-related enzymes or vitamins in the digestive tract.

Licensed from Univalor (University of Montreal). Invented by Prof Jean-Christophe Leroux, now of Institute of Pharmaceutical Sciences, ETH Zurich.

Patents pending worldwide, 20 years expiration in 2026.

BL-1020 Orally available GABA-enhanced antipsychotic with pro-cognitive activity. Final analysis of data from 168 evaluable pts from CLARITY study is underway and will inform a decision on whether to continue development, seek an out-licensing partner or abandon.

Phase II/III CLARITY trial was stopped after failing a pre-planned interim analysis. Earlier 363-pt Phase IIb (EAGLE) study antipsychotic efficacy matching that of risperidone without evidence of the metabolic side-effects and showed evidence of improvement in cognition.

Licensed from Ramot (Tel Aviv University) and Bar-Ilan Research & Development.

Patents granted or pending worldwide, 20-year expiration in 2033.

Source: Edison Investment Research.

BioLineRx | 9 December 2013 5

Broad R&D pipeline BioLineRx’s R&D pipeline consists of six internal clinical-stage projects, one partnered programme, and three preclinical (one of which has been partnered) and five exploratory development programmes. The current clinical-stage assets are summarised in Exhibit 2 (opposite). In our opinion, the most important programmes are: BL-1040 (for prevention of cardiac remodelling following acute myocardial infarction), BL-8040 (for AML and potentially other haematological cancers) and BL-7010 (Coeliac disease). In addition, BL-8020 (for hepatitis C infection) is interesting but addresses a highly competitive and fast-changing HCV market, which makes it a ‘wild card’.

In addition, the antipsychotic drug BL-1020 is excluded from the consideration because of doubts about whether it may be developed any further following a setback earlier this year. BL-1020 was undergoing a large Phase II/III study for schizophrenia, but this failed to show adequate efficacy at an interim analysis and was terminated early. BioLineRx intends to analyse the full clinical trial data (which will shortly become available) and this will inform a final decision.

BioLineRx also has three preclinical and five exploratory development programmes, summarised in Exhibits 3 and 4. Details on current studies are shown in Exhibit 5 and data from completed studies (including for completeness, BL-1020) in Exhibit 6 (overleaf).

Exhibit 3: Preclinical programmes Code Target

indication Description Licensor/Licensee

BL-8030 HCV NS3/4A inhibitor with a high barrier to development of resistant variants. Favourable in vitro characteristics including potency, selectivity, activity against resistant mutants, reduced P450 enzyme inhibition and a wide therapeutic index. Antiviral activity shown in vitro against a wide range of HCV genotypes. Preclinical studies have shown a good safety profile with specificity to the viral protease and lack of activity against human proteases and a clean profile vs human liver enzymes suggesting lower potential for drug-drug interactions. PK studies in animals indicate BL-8030 has good oral bioavailability, with the potential for once-daily dosing in the clinic.

Licensed from Genoscience and RFS Pharma. Out-licensed to Jiangsu Chia-tai Tianqing Pharmaceutical (China/HK only). Terms includes a (small) upfront fee, plus future development, regulatory and commercialisation milestones up to ~$30m, plus high single-digit royalties.

BL-9010 (previously EDP-14)

Severe allergies (pos also chronic urticarial)

Novel bi-specific antibody links together two immunological modulators IgE and CD300a. Allergen-bound IgE activates cells involved in allergic responses, such as mast cells, while CD300a inhibits immune responses. Effective blockade of allergic responses in murine model of asthma, which was replicated in human mast cells in vitro.

Licensed from Yissum/University of Genoa.

BL-9020 Prevention of Type I diabetes.

Antibody to the cytotoxicity receptor NKp46 that protects insulin-producing pancreatic cells. Intended to slow/prevent development of Type 1 diabetes. Preclinical studies in a mouse model of Type 1 diabetes preserved insulin production in 60% of subjects vs 0% with control (Gur et al. Nat Immunol. 2010 Feb; 11(2):121-8).

Licensed from Yissum, BG Negev Tech. and Hadasit. Invented by Profs Ofer Mandelboim (Hebrew University) and Angel Porgador (Ben Gurion University).

Source: BioLineRx, Edison Investment Research

Exhibit 4: Early development projects Code Target

indication Description Inventors

EDP 21 Weight loss Recombinant mutant of the human leptin hormone, which acts as a leptin agonist. Prof Arieh Gertler (Hebrew University) and Dr Eran Elinav (Weizmann Inst.)

EDP 25 Bacterial infections

Inhibitors of the Rel proteins that enable bacteria to adapt to environmental changes. Rel inhibitors have potential to disrupt the survival mechanisms in bacteria.

Prof Gad Glazer (Hebrew University)

EDP 26 Asthma Molecules targeting the voltage sensor of Kv7.4, Kv7.5 and TRPV1 channels. Prof Bernard Attali (Tel Aviv University) EDP 32 Parkinson's

Disease Alpha-synuclein derived peptide that inhibits alpha-synuclein aggregation. Prof Ehud Gazit and Dr Ronit Shaltiel-

Karyo (Tel Aviv University) EDP 34 Neuropathic

pain and scleroderma

Small molecule that regulates the opioid-induced glial activation by targeting the critical TLR4/MD-2 complex formation, thus preventing morphine binding to TLR4 receptor in glia, resulting in enhanced analgesic effect.

Profs Linda Watkins and Hang Hubert Yin (University of Colorado at Boulder)

Source: BioLineRx, Edison Investment Research

BioLineRx | 9 December 2013 6

Exhibit 5: Key clinical trials (details) Product Study Primary/secondary endpoints Data BL-1040/ Bioabsorbable Cardiac Matrix

306-pt pivotal CE mark registration trial of 4mL (±0.2mL) of BCM or saline administered through intracoronary slow bolus injection over 15-30s at least two days after PCI but within seven days of onset of symptoms. Subjects have all had successful PCI with stent placement after STEMI.

Primary endpoint: Left Ventricular End Diastolic Volume Index (LVEDVi) at 6 mos. Secondary endpoints: (1) Kansas City Cardiomyopathy Questionnaire; (2) six minute walk test; (3) NYHA functional classification; (4) CV death, non-fatal heart failure events or CV hospitalisations, and (5) re-hospitalisation due to any CV event.

2014

BL-8040 50-pt Phase II study of cytarabine ± BL-8040 in adults with relapsed/refractory acute myeloid leukaemia. Pts will receive BL-8040 as monotherapy by sc injection (qd) for two days followed by concurrent administration with standard salvage chemotherapy over 5 days.

Primary endpoint: safety and tolerability. Secondary endpoints: include PK profile and an efficacy evaluation as assessed by various parameters, including response rate by bone marrow biopsy.

Partial results end 2013/full results H2 2014

BL-8020 40-pt Phase I/II study of ribavirin monotherapy followed by fixed combination with hydroxychloroquine (BL-8020) in pts with chronic HVC infection. In stage 1 subjects will receive ribavirin (1,000mg/day bid if ≤75kg and 1,200mg/day bid if >75 kg) as monotherapy for 8 wks. In stage 2, subjects will receive HCQ 575mg qd in addition to same dose of RBV for up to 16 wks.

Primary endpoint: safety and efficacy at 24 wks (16-wk combination therapy following 8 wks of monotherapy). Secondary endpoints: efficacy of 8 wks monotherapy with RBV. Note: study enrols pts of any genotype who have previously failed or relapsed following standard-of-care treatment and design allows intra-subject analysis of effect combination HCQ/RBV vs RBV.

H214

BL-5010P Up to 20-pt single-arm, open-label, bridging study for CE mark registration to assess efficacy of a single application of BL-5010 for the removal of seborrheic keratosis (SK) lesions.

Primary endpoint: complete lesion removal rate at days 30, 90 and 180. Secondary endpoints: investigator/patient-assessed cosmetic outcome at days 30, 90 and 180; incidence of adverse reactions, proportion of lesions which are suitable for histopathology.

H214

BL-7010 A 32-pt two-part Phase I/II study. Part 1: Single ascending administration in two alternating cohorts of eight pts each with up to six escalating administrations. Part 2: 14-day repeated administration study in one cohort. Each cohort (parts 1 and 2) consists of eight pts (six on BL-7010 and two on pbo). Option to add an additional cohort with a different quantity of BL-7010.

Primary endpoint: safety of single and repeated ascending doses of BL-7010. Secondary objectives: assessment of the systematic exposure. Population is well controlled coeliac pts with no GI symptoms, with negative serology for transglutaminase 2 (TG2) and EMA antibodies (IgA).

Mid-2014

Source: Edison Investment Research

Exhibit 6: Clinical study data Product Study Efficacy results BL-1040 27-pt Phase I/II study in AMI.

Interim data from 5 pts (shown right).

Measure Baseline 90 days LV ejection fraction 47 ± 9% 49 ± 7% LV diastolic volume 132 ± 20ml 122 ± 24ml LV systolic volume 67 ± 11ml 62 ± 8ml Pro BNP (pg/ml)1 830 ± 580 480 ± 414

BL-7040 22-pt open-label Phase I/II in moderately active ulcerative colitis. Pts treated for up to five weeks with BL-7040: 12mg/day for up to three weeks, followed by 40mg/day for two additional weeks.

Primary endpoint: Reduction in the Mayo score from baseline to completion of treatment. 16/22 pts completed the full five-wk treatment and two-wk follow-up; 8/16 pts (50%) met the primary endpoint, while the remaining 8 pts showed stable clinical condition or minor improvement. 9/16 (56%) demonstrated decreases of >1 point in the rectal-bleeding sub-score and 11/16 (69%) had rectal-bleeding sub-scores of ≤1 (in 6/11 pts, no rectal bleeding was seen). No predefined threshold for meeting the endpoint, but 50% rate of clinical response was considered a success, given historical data suggests a response rate of 30-70%. Secondary endpoints: 50% of completing pts also met certain secondary endpoints, such as a partial Mayo score reduction and mucosal healing evaluated by endoscopy sub-score measurements. Results for other secondary endpoints were not conclusive, but some positive trends were noted. BL-7040 was highly safe and well tolerated, with a very low incidence of mild-to-moderate AEs.

BL-8040 Non-randomised, open-label 18-pt Phase I/IIa single dose, dose-escalation (30-900µg/kg) in multiple myeloma with stem cell mobilisation for transplantation.

Safe and well tolerated at all doses tested. Rapidly absorbed with no observed lag time, with peak plasma concentrations occurring 0.5h after administration. Induced a robust and dose dependent mobilisation of progenitor stem cells and lymphocytes from the bone marrow to the peripheral blood in all patients tested. At high doses (0.3, 0.9mg/kg) mobilisation of stem cells and lymphocyte was fast, within 2-4hr, and remained for more than 24hr, allowing dose dependent collection of CD34+ cells for transplantation. At the highest dose, the number of collection events reduces to one and the average number of CD34+ collected was 20×106/kg. At the highest dose, the number of CD138+ multiple myeloma cells was reduced. (Note: this study conducted by the originator, Biokine).

BL-5010 60-pt Phase I/II trial of BL-5010 in removal of SK lesions.

Achieved 96.7% success in removal of the lesion at 30 days after a single application. High levels of satisfaction with cosmetic outcome (ranked at 180 days as good or excellent in 94.6% (investigators) and 84% (patients)). None of the patients reported moderate or severe drug-related adverse events. Mild adverse events reported included skin and subcutaneous tissue disorders (n=5, 8.3%) and general and administration site disorders (n=2, 3.3%). Pruritus was the only drug-related adverse event reported by more than two patients (n=4, 6.7%). Showed a good safety profile with no persistent irreversible AEs observed at the treated site.

BL-1020 363-pt Phase IIb study (EAGLE) of low (10mg/day) or high dose (20-30mg/day) of BL-1020, risperidone (2-8mg/day) or pbo over 6 wks.

Primary endpoint: Results for PANSS score showed high dose BL-1020 superior to pbo (p=0.002), risperidone superior to pbo and BL-1020 not different to risperidone (p=0.390). BL-1020 low dose did not separate from pbo. High dose BL-1020 was superior for PANSS positive symptoms (p<0.001) and general psychopathology (p=0.003) and showed a trend (p=0.067) for negative symptoms vs pbo, and significant improvement in BACS (cognition) vs pbo and risperdal, p=0.027. Published in the Journal of Clinical Psychiatry (Sept 2012).

Source: Edison Investment Research. Note: 1 B-type natriuretic peptide is produced to cardiac cells in response to excessive stretching; lower values suggest a better outcome.

BioLineRx | 9 December 2013 7

BL-1040 – protecting the heart after STEMI BL-1040 or Bioabsorbable Cardiac Matrix (BCM) is intended for the reduction/prevention of adverse remodelling in the heart following a heart attack (acute myocardial infarction or AMI), which in turn leads to congestive heart failure. The heart attack itself is caused by an occlusion or blockage of a coronary artery that leads to ischaemia (lack of oxygen) and cardiac tissue death. Treatment of AMI is designed to restore blood flow but the infarcted area tends to enlarge and deform, with dilation of the left ventriculum (LV). This results in LV dysfunction and low ejection fraction. BCM is intended to provide a temporary structural support to the infarcted myocardium to prevent this progressive LV dilation/remodelling and, in doing so, maintain LV pump function.

The product is intended to be used after percutaneous coronary intervention (ie angioplasty) with stent placement, the standard treatment for STEMI (ST segment elevation myocardial infarction, a type of severe AMI in which the coronary artery is completely occluded). On administration, BCM transitions to a gel that provides mechanical support to the damaged heart tissue and allows a more compact, less dilated or tighter scar to form. The product is delivered by intra-coronary injection, between two to seven days after PCI. The gel is resorbed naturally and excreted over a period of ~six weeks. There are solid data from animal models suggesting that BCM can improve cardiac outcomes post AMI,1,2 but very little human efficacy data available. BioLineRx conducted a 27-patient Phase I/II trial in 2009, for which it reported some positive safety data.

BioLineRx licensed BL-1040 to Ikaria, a privately-held US speciality pharmaceutical company focused on critical care,3 where the product appears to be one of its two key R&D programmes. Ikaria is running a 306-patient pivotal study (known as PRESERVATION-1), designed to support a CE mark application (since the product will be regulated in the EU as a medical device). This study is scheduled to render data in July 2014 (suggesting it is close to full enrolment), although BioLineRx has guided to a data release in 2014. The study’s endpoints are change in six-month Left Ventricular End Diastolic Volume Index (LVEDV), the six-minute walk and a quality-of-life questionnaire. There is no interim analysis in the study.

BL-1040 has a very strong competitive position with little, if any, competition from approved drugs or devices and effectively no competing therapeutic approaches that specifically address post-AMI cardiac remodelling. There is a small number of mostly stem cells programmes in the competitive space (Exhibit 7).

Exhibit 7: Studies of therapies to prevent or treat cardiac remodelling following STEMI Product/company Stage Notes on trial CRT-D device/Medtronic

250-pt Phase II trial (PRomPT) of single vs dual site placing to prevent adverse cardiac remodelling following AMI (results: Apr 2015).

Medtronic Cardiac Resynchronization Therapy with Defibrillator. Primary endpoint: LVEDV

N/A/Stemedica Cell Technologies

40-pt Phase II trial of allogeneic mesenchymal bone marrow cells (results: May 2015).

Two different doses vs pbo.

MTP-131/Stealth Peptides

200-pt Phase II trial of MTP-131 in ischemia reperfusion injury (results: Feb 2014).

Primary endpoint is infarct size. Mitochondria to treat ischemia reperfusion injury

AMR-001/Neostem 160-pt Phase III study (PreSERVE-AMI) vs pbo (results: Dec 2013). Bone marrow derived autologous CD34+ selected cells N/A/post-conditioning therapy

140-pt Phase II study of post conditioning (results: Mar 2014). Consists of four cycles of 30s inflation using a standard angioplasty balloon followed by 30s of reperfusion.

BB3/ Angion Biomedica

80-pt Phase II study of BB3 as an adjunct to PCI (results: Jul 2014). BB3 is a small molecule mimetic of hepatocyte growth factor/scatter factor.

POL6326/Polyphor 140-pt Phase II study (CATCH-AMI) of POL6326 vs pbo (results: Dec 2015). CXCR4 antagonist for cell mobilisation. MPC/Mesoblast/Teva 225-pt Phase II trial of MPC (2 diff doses) vs pbo (results: Dec 2014). Mesenchymal Precursor Cells ADRC/Cytori 45-pt Phase II ATHENA trial (ADVANCE) (results: H114). ADRCs delivered via the intracoronary route Source: Edison Investment Research

1 Landa N, Miller L, Feinberg MS, et al. Effect of injectable alginate implant on cardiac remodeling and function after recent and old infarcts in rat. Circulation. 2008;117(11):1388-1396. 2 J. Am. Coll. Cardiol. 2009;54;1014-1023 3 Ikaria’s lead product, INOmax (nitric oxide) for inhalation, is the only FDA-approved drug treatment of hypoxic respiratory failure in term and near-term newborns.

BioLineRx | 9 December 2013 8

The requirements for CE mark are less onerous than for a drug (and indeed for a US PMA). However, we presume the PRESERVATION-1 study will still have to show a statistically significant improvement in the composite endpoints (LVEDV, 6-min walk and QLQ) to support an approval. We note that the PRESERVATION I CE mark registration study is being carried out at ~60 centers in nine countries around the world, including 14 sites in the US. Ikaria is planning to start a larger, c1,000-patient study to support a US registration application.

The product addresses a potentially very large market. Approximately 40% of AMI patients develop left ventricle dilatation or 20% may progress to heart failure, with a consequent increase in mortality risk. This population would be around 380,000/year in the US, which would suggest a market opportunity there alone of ~$1.5bn at an illustrative US$4,000 per procedure. Some 690,000 patients/year in Europe and Australia have AMI with 40% experiencing STEMI.

BL-5010P – removal of skin lesions BL-5010P is a pen-device that delivers a BL-5010, a formulation of two acids (both already approved for cosmetic use) for the non-surgical removal of benign (ie non-cancerous) skin lesions. Lesions, such as seborrheic keratosis (SK), are common and often treated for aesthetic or sometimes medical reasons with cryotherapy (liquid nitrogen) and electro-coagulation (electrical burning) or via conventional surgery. Cryotherapy and electro-coagulation are effective but associated with pain and inflammation. Surgical removal is used when histological examination is required (eg to exclude cancer), but it can be associated with an undesirable cosmetic outcome. The number of skin lesion removal procedures and in particular non-surgical procedures has substantially increased in recent years.

BioLineRx has conducted a 60-patient study with the BL-5010 formulation, which showed high rates of patient and physician satisfaction with the cosmetic outcome. It is now conducting a small bridging study to support a registration application for the pen device. Success in this study should enable it to immediately apply for CE-mark registration of the product, which could be ready for the European market by H214. In parallel, BioLineRx is engaged in discussions with potential partners.

There is a small number of pharmaceuticals, eg Leo Pharma’s ingenol mebutate (Phase II), in development for this indication, but no products, to our knowledge, that would be regulated as a medical device. We consider that BL-5010P is likely to be sold at a relatively low cost and is thus likely to offer a niche, perhaps ~$50-100m/year4 opportunity. However, it should also have comparatively little development risk at this point. BiolineRx is relatively advanced licensing discussions for BL-501j0 in key territories and that it is planning additional pivotal trials in actinic keratosis and other indications (viral/plantar warts and skin tags) in 2014.

Exhibit 8: Target profile of BL-5010 vs competing modalities for removal of skin lesions BL-5010 Cryotherapy Laser Electrodesiccation Surgery PDT Speed of Tx Quick Very quick Medium Slow Slow Slow Efficacy Very high High Very high Very high High High Pain Minimal Moderate Moderate Data Yes Yes Scarring Minimal Hypopigmentation None Some Significant None Application to sensitive areas Yes No Yes No Yes Yes Applicable for large lesions Discrete No No No No Yes Histology compatible Yes No No No No No Set-up time Quick Quick Significant Lengthy Lengthy Lengthy Cost Low Very low High Medium Medium High Source: BioLineRx

The BL-5010P device allows accurate and consistent distribution of BL5010 to the target lesion; it is designed for single patient use but with potential to treat multiple lesions; and it comes in a ready-for-use format. The device is also intended to be hand-held, easy to use and to have an aesthetic 4 Peak sales of Solaraze (diclofenac gel), indicated for actinic keratosis, were around US$100m prior to the introduction of generics.

BioLineRx | 9 December 2013 9

and ergonomic design. The product has a low cost of manufacture, so should have good margins even at a relatively low price.

BL-8040 – CXCR4 antagonist for AML BL-8040 is a highly selective antagonist (inverse agonist) of the chemokine CXCR4 that is in development for AML with potential in other haematological cancers and solid tumours. The compound addresses the same target as Mozobil (plerixafor, Sanofi), but appears in preclinical models to have greater and more sustained activity (see Exhibits 8 and 9). It also appears to have a direct anticancer effect (inducing apoptosis in tumour cells), which has not been seen with Mozobil.

Preclinical studies with BL-8040 have shown a robust mobilisation of hematopoietic stem cells as well as anti-tumour effect in vivo against human-derived tumours, including multiple myeloma, lymphoma, leukaemia, neuroblastoma, retinoblastoma and non-small cell lung cancer.5 BL-8040 may also interfere with CXCR4-mediated drug-resistance and thus has the potential to potentiate anticancer drugs that do not eliminate residual disease and cancer stem cells. The product’s originator, Biokine, conducted a Phase I/IIa study in multiple myeloma (data are shown earlier in Exhibit 6). BioLineRx is conducting a study in adults with relapsed/refractory AML. An academic study6 examined Mozobil in combination with chemotherapy (mitoxantrone, etoposide and cytarabine) in r/r AML and achieved an overall CR+CRi7 rate of 46%. Several academic/collaborative groups are running early studies with Mozobil in combination with chemotherapy for AML.

There are three other CXCR4 blockers in clinical development: Bristol-Myers Squibb’s BMS-936564, a CXCR4 antibody, and Lilly’s CXCR4 peptide inhibitor, LY2510924, and Polyphor’s POL6326 (see Exhibit 11). Lilly recently disclosed it had discontinued early development of a separate CXCR4 MAb.

Exhibit 9: Mobilisation of neutrophils relative to Mozobil

Exhibit 10: Progenitor cells in peripheral blood relative to Mozobil

Source: BioLineRx. Note: Time post BL-8040/Mozobil injection. Source: BioLineRx. Note: AMD3100 is Mozobil.

Exhibit 8: Competing CXCR4 antagonists Product/company Stage Indications Mozobil (plerixafor)/Sanofi

Approved Use in combination with GM-CSF for mobilising haematopoietic stem cells to peripheral blood for collection and transplantation for non-Hodgkin’s lymphoma and multiple myeloma (MM).

Phase I/II Studies in combination with clofarabine in frontline AML and with bortezomib in relapsed/refractory MM. LY2510924/Lilly Phase II Studies in small cell lung cancer (carboplatin/etoposide ± LY2510924) and renal cell carcinoma (sunitinib ± LY2510924). BMS-936564/BMS Phase I Studies underway for in MM (lenalidomide/dexamethasone ± BMS-936564) and testing monotherapy and combinations with

lenalidomide/dexamethasone or bortezomib/dexamethasone in relapsed/refractory MM. POL6326/Polyphor Phase I/II Studies in haematologic malignancies, MM and breast cancer (in combination with eribulin). Source: Edison Investment Research

BL-8040 has also been shown to have potential for thrombocytopenia in preclinical studies. Repeat doses significantly increased the number of megakaryocytes within the bone marrow (leading to increased production of platelets in the blood) in both healthy and chemotherapy induced-

5 Fahham, D, J Thorac and Cardiovasc Surg, 2012. 6 Uy G et al, Blood. 2012 Apr 26;119(17):3917-24 7 Complete remission and complete remission with incomplete blood count recovery.

BioLineRx | 9 December 2013 10

thrombocytopenic mice. In addition, BL-8040 increased the number of haematopoietic progenitor cells within the bone marrow and in the blood. BioLineRx is considering a second development path in 2014 for BL-8040 in stem cell mobilisation (for transplant) and chronic myeloid leukemia (CML).

Exhibit 9: Later-stage developmental therapies for AML Product/company Setting Studies/notes Vidaza (azacytidine)/ Celgene

First-line elderly (de novo/secondary)

480-pt Phase III study (AZA-AML-001) vs physician choice (intensive chemotherapy, low dose cytarabine or BSC) (results: Oct 2013).

CC-486 (oral azacytidine)/ Celgene

Maintenance in pts with CR after induction

460-pt Phase III study (QUAZAR AML-001) comparing BSC ± CC-486 (results: Nov 2017).

Revlimid (lenalidomide)/Celgene

First-line, elderly (de novo and tAML)

120-pt Phase II study (CC-5013-AML-001) of lenalidomide vs azacitidine→len vs azacytidine (results: Jun 2014).

Sapacitabine/Cyclacel First-line, older (aged >70yrs)

470-pt Phase III trial (SEAMLESS) of sapacitabine alternating with decitabine vs decitabine only (results: Oct 2014).

Midostaurin/ Novartis

First-line, older (<60 yrs) with FLT3 mutations

714-pt Phase III trial of induction therapy ± midostaurin followed by consolidation (high-dose cytarabine in CR pts); maintenance with midostaurin or pbo in CR pts with FLT-3 mutations after consolidation (fully recruited, results: Jul 2014).

Volasertib/B. Ingelheim First-line (≥65 yrs) 660-pt Phase III study (POLO-AML-2) low-dose cytarabine ± IV volasertib (results: April 2016). CPX-351/Celelator First-line (secondary) 300-pt Phase III study of CPX-351 (cytarabine: daunorubicin liposome) vs cytarabine + daunorubicin in Vosaroxin/Sunesis Relapse/refractory 675-pt Phase III study (VALOR) of cytarabine ± vosaroxin (results: Q2 2014). Quizartinib/Ambit Bio Relapsed/refract, FLT3+ 350-pt Phase III of quizartinib vs physicians’ choice planned for early 2014. SGI-110/Otsuka Elderly AML/MDS 250-pt Phase I/II study (results: Dec 2013). Erismodegib/Novartis AML (first line and r/r) 80-pt Phase II study (results: Jan 2015). Vismodegib/Roche r/r AML and MDS 60-pt Phase II study of vismodegib + cytarabine (results: Jun 2015) Source: Edison Investment Research. Note: BSC: best supportive care.

BL-7010 – taking on coeliac disease BL-7010 is an orally available, non-absorbed sequestering agent for the immunogenic gliadins that are one of the main components of gluten. It is intended for the treatment of coeliac disease (and potentially, gluten sensitivity) and is expected to be taken, as needed, after suspected accidental gluten exposure in patients who are in a gluten-free diet. The BL-7010 binds to the gliadins in the gut, preventing their absorption. It does not accumulate in the GI tract and is secreted via faeces. This non-pharmacological mechanism means that it is likely to be regulated as a medical device (in the EU) which should allow for a faster time-to-market, relative to a pharmaceutical.

Coeliac disease is a chronic autoimmune inflammatory disease, caused by an immunological reaction to gluten found in wheat, barley and rye. It is characterised by damage to the lining of the small intestine and typically leads to dyspepsia, malabsorption and a variety of other symptoms. It occurs in genetically predisposed individuals and is thought to affect 1-2% of the world’s population. Its prevalence is increasing with improved diagnosis and awareness. Around 50% of coeliac patients continue to be symptomatic, despite a gluten free diet.

Preclinical studies suggest that BL-7010 may reduce clinical deterioration and have shown no effect on weight or interaction with pepsin, pancreatin or on absorption of vitamins in the diet. BioLineRx expects shortly to recruit the first patient for a Phase I/II study of BL-7010, being conducted at a world-leading centre for coeliac disease in Finland. It expects this study to render results in mid-2014, which if positive, would support a Phase II efficacy study, which could start by the end 2014. There are no currently approved pharmacological agents approved for coeliac disease and only three pharmaceutical programmes believed to be in active clinical development (see Exhibit 13). There is also anecdotal evidence of increasing interest from pharmaceutical companies in licensing potential therapeutic approaches, for example, evidenced by the recent licensing deal for Alvine’s ALV003 ($70m upfront for an exclusive option to either acquire ALV003 or Alvine itself) and the market potential could be large. The 1-2% prevalence rate of coeliac suggests the market opportunity could be of the order of US$8bn, according to BioLineRx.

BioLineRx | 9 December 2013 11

Exhibit 10: Competing programmes in coeliac disease Product/company Mechanism Stage larazotide acetate/Alba/Teva Intestinal tight junction modulator 320-pt Phase II study (results due: Nov 2013) ALV003/Alvine/AbbVie Gluten-specific proteases 500-pt Phase II study (results: Dec 2014). Nexvax2/ImmusanT/BTG Epitope-specific immunotherapy. 34-pt Phase I study completed. Source: Edison Investment Research

BL-8020 – improving on RBV for HCV BioLineRx’s lead HCV candidate is BL-8020, a proprietary co-formulation of ribavirin and hydroxychloroquine (HCQ). Ribavirin is a component of the current standard therapy for HCV with pegylated interferon (peg-IFN) and a protease inhibitor. However, this standard is widely considered likely to change with the approval of Sovaldi (sofosbuvir, Gilead).

HCQ is a long established anti-malarial drug, also used for lupus erythematosus, cancer and rheumatoid arthritis. It is also known to be an inhibitor of autophagy, an innate cellular process where unnecessary or dysfunctional cellular components are broken down.

By virtue of its HCQ component, BL-8020 is thought to offer a novel and complementary mechanism by inhibiting HCV-induced autophagy, which is exploited by HCV during viral replication. By inhibiting autophagy, it is proposed that BL-8020 could reduce the ability of HCV to replicate in the human cell. This is a novel approach and there are no studies exploring the potential HCQ in HCV (there are however, 14 clinical studies underway in various cancer indications, all investigator-sponsored, involving standard of care treatments in combination with HCQ where inhibition of autophagy is postulated as being desirable).

BioLineRx is conducting a 32-patient open-label Phase I/II study of BL-8020 over 16 weeks in chronic HCV looking at activity in certain hard-to-treat genotypes. Preclinical studies have shown BL-8020 to have a synergistic effect in vitro when combined with several classes of anti-HCV agents and BioLineRx’s strategy is to see if BL-8020 can be used in place of ribavirin in all-oral (ie IFN-free) combination treatments to increase potency and thereby reduce duration of therapy, or improve tolerability (by allowing use of lower dosages).

However, the HCV space is highly competitive and there is a widely held assumption that it will become dominated by sofosbuvir in the near term. It is notable that some hitherto strong players (such as Bristol-Myers Squibb) have recently pulled out, presumably for competitive reasons.

Current HCV therapies by genotype are listed below.

Exhibit 11: Current HCV treatment by genotype Genotype Standard treatment Duration, sustained virologic response rate Genotypes 1a and 1b

peg-IFN/RBV and protease inhibitor (boceprevir or telaprevir); PI likely to be substituted by sofosbuvir or simeprivir.

Treatment for 48 weeks. SVR rate is 40-50% in treatment naïve. 1a more prevalent in the US than 1b (Europe and Japan). Both considered hard to treat. Sofosbuvir/peg-IFN/RBV SVR 12 rate is 89%.

Genotype 2 peg-IFN/ribavirin, but likely shortly to become sofosbuvir/RBV.

Treatment for 3 to 12 mos. SVR rate in treatment naïve is ~90%. Considered easiest to treat.

Genotype 3 Treatment for 3 to 12 mos. SVR rate is ~ 65%. Genotype 4 peg-IFN/ribavirin Treatment for 48 weeks. SVR rates are >70%. Source: Edison Investment Research, various sources. Notes: Genotypes 5 and 6 are rare and usually excluded from studies.

The approval of new direct acting antivirals (DAAs) is expected to change the landscape and quickly remove the dependence on IFN-based combinations for genotypes 2 and 3. Sofosbuvir has just been approved for use with RBV as an all-oral two-drug therapy for Genotypes 2 and 3, and in combination with RBV and peg-IFN for Genotypes 1, 4, 5 and 6). Similarly, Olysio (simeprivir, J&J) has also just been approved for treatment of genotype 1 in combination with Peg-IFN and RBV. All of this makes it very difficult to assess the economic value of BL-8020, even putting aside from the fact that it is a fixed dose combination of two already available agents and is therefore only covered

BioLineRx | 9 December 2013 12

by a method of use patent8. BioLineRx believes that the pharmacokinetics cannot be copied with generic sourced agents and therefore the IP should be sufficient to make the product commercially viable in relation to co-administration of ribavirin and HCQ.

BioLineRx believes that BL-8020 will have a low production cost and may therefore be suited as low-cost HCV regimen for developing countries (which account for the majority of HCV cases) and where the high cost of new agents such as sofosbuvir would be prohibitive.9 BL-8020’s potential strengths and weaknesses are summarised in Exhibit 12.

Exhibit 12: BL-1020 competitive profile Strengths Weaknesses Use of two known drugs with well-established safety profiles allows

opportunity for rapid clinical development. Inhibition of HCV-induced autophagy in the host cells is novel, complementary

to other agents and suggests pan-genotypic activity. Targeting of host cells may provide a higher barrier to resistance compared to

DAA.

Combination of generically available agents. Appears to rely on a method of use patent only, ie no formulation technology. May be commercial only at low price and thus focused on the developing

world. RBV free combinations to come to the fore in fast-changing HCV landscape.

Source: BioLineRx, Edison Investment Research

BL-7040 BioLineRx is in active discussions regarding co-development and other partnership arrangements for BL-7040, an orally-available oligodeoxynucleotide with dual activity on the CNS (acetylcholinesterease) and immune systems (Toll-Like receptor 9 agonist). It completed a small but positive Phase I/II study in ulcerative colitis, a form of inflammatory bowel disease. Histological/biochemical analysis of samples taken before and after treatment showed significant reductions in neutrophils (p=0.002) and levels of the pro-inflammatory cytokine, IL-6 (p=0.046), which correlated with clinical improvement.

Valuation

In reviewing BioLineRx’s portfolio, we have determined that five programmes continue the bulk of the economic value (BL-1040, BL-8040, BL-7010, BL-5010 and BL-7040) and thus we consider these to represent the core investment case. This approach excludes certain programmes, notably BL-8020, leaving these to represent pure upside pending greater clarity of their development or a partnering event. We consider BL-8020 to be something of a wild card in terms of valuation, offering potentially significant value contribution if it is both effective and the IP is robust.

On the basis of the five core pipeline assets, we value BioLineRx at $210m, equivalent to $8.9/ADR or $7.9/ADR fully diluted. This suggests an over 200% upside to the share price ($2.6/ADR), an unusually high ratio. Furthermore, it should be noted that this is a current fair value and not a future-orientated price target. The valuations is derived form a risk-adjusted NPV of the five core programmes adjusted for costs of development up to the expected point of licensing. The key contributors to the valuation are BL-1040 ($109m), BL-8040 and BL-7010 (both $40m). Note at this point, we only consider the AML indication for BL-8040; thus the initiation of studies in stem cell mobilisation and/or other haematological indications would increase the valuation.

The risk-adjusted NPV is itself derived from our assumptions of the terms of potential and actual licensing agreements, development timelines, peak sales etc, using a standard 12.5% cost of capital (details are in Exhibit 13, overleaf). For simplicity, royalties are assumed payable for all products from launch to 2030, with no terminal value, which is broadly consistent with BioLineRx’s IP. There is also a modest diminution in sales assumed at the tail where the composition of matter patents expires before 2030. No assumption is currently made for tax, given the extent of tax loss

8 A US patent application (No 13836397) is on file but not yet granted. 9 Sovaldi is priced in the US at $1000/day.

BioLineRx | 9 December 2013 13

carry-forwards. The contribution from each programme is adjusted for BioLineRx’s economic interest in each programme.

The largest value contributor is BL-1040, for which we calculate a value of $113m or 53% of the total. However, the product’s economic importance to BioLineRx is perhaps even greater, because the economics of the licensing deal are known and also the fact that BioLineRx does not incur any costs in advancing this programme. One of the most challenging issues with valuing this asset is in assessing an appropriate probability, given the fact that there are very few clinical data available. As a result, we have used a lower probability that might otherwise be the case, given it is already in an EU registration study.

Similarly, the peak sales potential of BL-7010 is very difficult to model, since it is not known what proportion of Coeliac patients that may be addressable, whether the product will be used chronically or only after accidental gluten exposure, and how much it may cost. Given the hypothetical market size and the relative lack of competition, we consider that an illustrative peak sales projection of $750m/year to be appropriate for the purposes of valuation. This represents <10% of the potential $8bn market size estimate based on conditions with a similar prevalence. Similarly for BL-8040, we have assumed peak sales of $450m in AML, which is consistent with projections for other companies we cover in the same space. Peak sales projected for BL-5010 are informed by reference to the pre-patent expiry peak sales of Solaraze.

Exhibit 13: BioLineRx key valuation summary Code Indication Pay-

away* Prob of

success*

Royalty assumed

Launch year* Peak sales* ($m)

rNPV ($m)

Notes

BL-1040

Cardiac remodelling

28% 30% 11-15% 2015 (EU), 2017 (US)

1,200 $109m Relatively low probability reflects lack of existing clinical data. Licensing terms with Ikaria are broadly disclosed.

BL-8040

AML 40% 30% 25% 2017 (US & EU) 450 $40m AML currently considered only; other potential haem indications (eg CLL) and stem cell mobilisation represent upside.

BL-7010

Coeliac disease

25% 15% 20% 2016 (EU), 2018 (US)

1.000 $40m Conservative. Very large un-served market.

BL-5010

Benign skin lesions

30% 90% 15% 2015 (EU), 2016 (US)

75 $20m Low-risk niche product. Potentially fast to market in EU.

BL-7040

IBD 25% 15% 15% 2018 (US& EU) 250 $18.2 m Expected to be licensed.

BL-8030

HCV 30% N/A 2019 (China) 100 - Not significant contribution at this point. Development, regulatory and commercialisation milestones of up to ~$30m, plus high single-digit royalties in China/HK.

BL-8020

HCV 30% N/A 2017 (US & EU) N/A - Not considered, difficult to estimate peak sales, given dynamics of HCV therapy landscape, considered as upside.

Cash $6m NIS25m, forecast at end 2014. R&D costs ($24m) Four years at NIS32m/year Total valuation $210m Equivalent to $8.9/ADR basic $7.9/ADR fully

diluted Source: Edison Investment Research.

Sensitivities

BioLineRx is subject to typical biotech company development risks, including the unpredictable outcome of trials, regulatory decisions, the success of competitors, financing and commercial risks. The investment case hinges on the success of its studies and its ability to secure partnerships for products on attractive economic terms. Most of BioLineRx’s R&D projects are pre-proof of concept and are therefore assumed to be at a high (and also a difficult to assess) risk of failure.10

10 This would not be true of BL-5010P.

BioLineRx | 9 December 2013 14

BioLineRx is heavily reliant on Ikaria for the development and commercialisation of BL-1040, which represents the single largest component of our valuation. Ikaria is also privately held and not subject to the same disclosure requirements as a public company11 and we consider that BL-1040 would enjoy a very much higher profile if this were not the case. It has recently been reported that Ikaria’s owners may be seeking at trade sale with a potential $2bn value, and we note that if such a transaction were to occur, it could considerably raise the profile of BL-1040 and highlight the value of BioLineRx’s economic interest in the programme.

BioLineRx is based in Israel and thus, relative to Europe and North America, it is (or may be perceived to be) at a higher operational risk, reflecting the volatile politics in the Middle East. This specific risk is not considered in this report. The ADRs may be sensitive to movements in the US$/NIS exchange rate, although this has been very stable (varying between US$0.25-0.3/NIS over the last five years).

Financials

BioLineRx ended the third quarter with cash of NIS71.6m ($20.3m) in cash and equivalents and has guided that this should fund operations into 2015, without assumption of any milestone payments receipts. Our model is consistent with this and shows a funding requirement in 2015 of NIS21m, illustrated, for simplicity, as long term debt.

BioLineRx has various funding facilities already in place, including ~$7m remaining of a $15m equity purchase agreement with Lincoln Park Capital (expiring in September 2015). The company also has two warrants issues outstanding, including warrants to purchase 2.6m ADS at an exercise price of $3.57, exercisable to 2017 ($9.2m) and 1.6m warrants (issued to OrbiMed), exercisable at US$3.94 per ADR ($6.3m) to 2018, which may bring in $15.5m. Furthermore, the company also has an unused $20m at-the-market equity facility.

Bioline has 237m shares outstanding as of 30 September, equivalent to 23.7m ADRs (one ADR=10 shares). The company’s functional currency is the New Israeli shekel, but it reports results with a convenience translation into US dollars (c US$0.25/NIS).

BioLineRx has received funding in the past from Israel’s Office of the Chief Scientist (OCS), which may be required to be repaid in certain circumstances. It had received a total of $14.7m in the framework of the incubator and $6.1m outside of the incubator from the OCS as of 31 March 2013. The OCS funding has been used to initiate 23 different development projects, of which 18 have been terminated. Other projects may be funded by the OCS outside of the incubator agreement.

Of its 10 current development projects, two have been approved to be funded through the OCS (BL-1040 and BL-7040). Pan Atlantic Bank and Trust, one of BioLineRx’s largest shareholders, has also provided non-dilutve grants of $5.0m for use in connection with in-licensing and development of early development stage therapeutic candidates. As of December 2012, BioLineRx had an accumulated deficit of US$119m.

11. An S1/registration statement filed with the SEC for a proposed IPO in 2010, which was withdrawn in 2011, is the only public information. It suggests 2010 sales were ~$290m.

BioLineRx | 9 December 2013 15

Exhibit 14: Financials NIS'000s 2011 2012 2013e 2014e 2015e Year end 31 December IFRS IFRS IFRS IFRS IFRS PROFIT & LOSS Revenue 0 0 0 0 0 Cost of sales 0 0 0 0 0 Gross Profit 0 0 0 0 0 EBITDA (53,019) (76,895) (59,160) (41,976) (41,976) Operating profit (before GW and except.) (54,582) (78,419) (60,320) (43,136) (43,136) Intangible amortisation (88) 0 (138) 0 0 Exceptionals 0 0 0 0 0 Other (3,983) 820 (3,200) (3,200) (3,200) Operating profit (58,653) (77,599) (63,658) (46,336) (46,336) Net interest 8,467 1,329 (2,738) 1,677 1,594 Profit before tax (norm) (46,115) (77,090) (63,058) (41,459) (41,542) Profit before tax (FRS 3) (50,186) (76,270) (66,396) (44,659) (44,742) Tax 0 0 0 0 0 Profit after tax (norm) (46,115) (73,132) (63,058) (41,459) (41,542) Profit after tax (FRS 3) (50,186) (76,270) (66,396) (44,659) (44,742) Average number of ADS outstanding (m) 12.4 16.9 23.4 23.4 23.4 EP ADR - normalised (NIS) (3.7) (4.3) (2.7) (1.8) (1.8) EP ADR - FRS 3 (NIS) (4.1) (4.5) (2.8) (1.9) (1.9) Dividend per ADS (NIS) 0.0 0.0 0.0 0.0 0.0 Gross Margin (%) N/A N/A N/A N/A N/A EBITDA Margin (%) N/A N/A N/A N/A N/A Operating Margin (before GW and except.) (%) N/A N/A N/A N/A N/A BALANCE SHEET Fixed assets 8,305 7,952 8,849 9,883 10,918 Intangible assets 1,144 1,063 1,053 1,181 1,309 Tangible assets 4,211 3,172 4,079 4,985 5,892 Investments 2,950 3,717 3,717 3,717 3,717 Current assets 103,355 82,856 74,247 28,399 3,635 Stocks 0 0 0 0 0 Debtors 3,825 2,254 2,412 2,581 2,761 Cash 98,843 79,798 71,027 25,010 65 Current liabilities (25,709) (24,011) (23,874) (23,874) (23,874) Creditors (25,402) (23,874) (23,874) (23,874) (23,874) Short-term borrowings (307) (137) 0 0 0 Long-term liabilities (193) (10,868) (10,868) (10,868) (31,868) Long-term borrowings (110) 0 0 0 (21,000) Other-long term liabilities * (83) (10,868) (10,868) (10,868) (10,868) Net assets 85,758 55,929 48,354 3,541 (41,189) CASH FLOW Operating cash flow (42,711) (75,145) (59,318) (42,145) (42,157) Net interest 1,949 301 2,738 (1,677) (1,594) Tax 0 0 0 0 0 Capex (951) (598) (2,067) (2,067) (2,067) Acquisitions/disposals (951) (598) (128) (128) (128) Financing 0 59,207 50,140 0 0 Dividends 0 0 0 0 0 Net cash flow (42,664) (16,833) (8,634) (46,017) (45,945) Opening net debt/(cash) (139,044) (98,426) (79,661) (71,027) (25,010) HP finance leases initiated 0 0 0 0 0 Other 2,046 (1,932) 0 0 0 Closing net debt/(cash) (98,426) (79,661) (71,027) (25,010) 20,935 * incl. warrant liability of NIS10.7m from 2012 Source: Edison Investment Research.

BioLineRx | 9 December 2013 16

Contact details Revenue by geography 19 Hartum Street PO Box 45158 Jerusalem 91450 Israel +972-2-5489100 www.BioLineRx.com

N/A

CAGR metrics Profitability metrics Balance sheet metrics Sensitivities evaluation EPS 2011-15 e N/A EPS 2013-15 e N/A EBITDA 2011-15e N/A EBITDA 2013-15e N/A Sales 2011-15e N/A Sales 2013-15e N/A

ROCE 14e N/A Avg ROCE YY-YYe N/A ROE 14e N/A Gross margin 14e N/A Operating margin 14e N/A Gr mgn / Op mgn 14e N/A

Gearing 14e N/A Interest cover 14e N/A CA/CL 14e N/A Stock days 14e N/A Debtor days 14e N/A Creditor days 14e N/A

Litigation/regulatory Pensions Currency Stock overhang Interest rates Oil/commodity prices

Management team CEO: Kinneret Savitsky PhD CFO/COO: Philip Serlin CPA, MBA CEO since January 2010. Previously, general manager of BioLine Innovations Jerusalem (2004-09). Formerly, senior scientist (1997-2000) and later vice president, biology of Compugen (NASDAQ: CGEN, 2000-04). Non-executive director of Evogene. Holds PhD and MSc from Tel Aviv University and BSc from Hebrew University of Jerusalem.

CFO and COO of BioLineRx since May 2009. Previously CFO/COO of Kayote Networks (January-August 2008), CFO at TesCom Software Systems Testing (TASE: TSCM, 2006-07), Chiaro Networks (2000-06). Senior manager at Deloitte Touche Tohmatsu (Israel, 1994-99) and senior accountant/analyst at US SEC (1986-92). Holds MBA and MA from George Washington University (US) and a BSc from Yeshiva University.

Chairman: Aharon Schwartz PhD VP, medical affairs/senior clinical advisor: Prof Moshe Phillip MD Chairman since 2003. Has 36-year career with various senior roles at Teva. Chairman of BioCancell (TASE: BICL), D-Pharm (TASE: DPRM), Amorphical and Yissum and director of many life science companies, including Clal Biotechnology Industries (TASE: CBI). Holds PhD from Weizmann Institute, MSc from Technion Institute of Technology and BSc from Hebrew University.

Appointed in 2004. Director of Institute for Endocrinology and Diabetes of the Israeli National Center for Childhood Diabetes at the Schneider Children’s Medical Center. Vice Dean for R&D at the Sackler School of Medical Education at Tel Aviv University.

VP, Business development: David Malek Chief scientific officer: Leah Klapper PhD Appointed in Oct 2011. Previously at Sanofi as director of oncology - new products and business development, Holds MBA from Tuck Business School at Dartmouth College and BA in Statistics and Political Science from the University of Haifa.

Appointed CSO in Nov 2013, previously general manager and vice-president of preclinical development, BioLine Innovations Jerusalem (2004-2012). Post-doctoral training at the Fred Hutchinson Cancer Research Center (US); holds a PhD from the Weizmann Institute of Science, an MSc in pharmacology and a BSc in life sciences from Tel Aviv University.

Principal shareholders (%) OrbiMed Israel Partners LP 11.3 Pan Atlantic Bank and Trust/FCMI Financial Corp (Albert Friedberg and family) 9.2 Teva Pharmaceutical Industries 5.0

Companies named in this report Ikaria, Sanofi (NYSE:SAN).

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